All Forum Posts by: Tim Herman

@Tammie Jones ignoring your soft costs makes it look like it will cash flow. Banks will underwrite the loan with a 5% vacancy. For a quick analysis I use 8% vacancy, 5% maintenance, 10% capex and 10% PM. When you get closer then you have to spend a little more time with the numbers. A 700 sf studio will not have the same variable cost as 1500 sf house.  If you look further down in the analysis you see the 50% rule. Half of your costs goes to expenses and half to mortgage. It shows you will lose $18 per month. If it is rehabbed recently then your capex costs could be low for a few years. 

@Tamera Muniz if this is a preforeclosure you have to offer at least what is owed otherwise the lender will have to do a short sale or the seller will have to bring cash to the table to close. He doesn't have cash otherwise he wouldn't be in preforeclosure. 

@Jeremiah Dunakin most people don't want to plunk down the fees for the background check before they are interested in renting the property. I do  a somewhat open house. Usually Friday evenings and Saturdays. When people call, I schedule appointments 15 minutes apart. Some of your potential tenants will flake out and not show up but your are only 15 minutes from the next showing.

@Gil Amos I'm not clear on what you are borrowing. Is the rehab and purchase price being 100% financed. If that is correct, then you are not using cash but financing. 10% fee is high and that would go into the loan fee on acquisition.

@Nikki Nicole You have a very understanding agent. 

@Sean Healy Is it already bank owned or a foreclosure. Differences. Both Both are usually bid blind without the ability to see the interior. Have to consider that in your bid. A foreclosure can be for taxes, hoa fees, second mortgage, first mortgage, etc. If it is a foreclosure the highest priority foreclosure can wipe out the other liens. Need to have a title search to make sure what lien is foreclosing.

If bank owned or REO then the foreclosing party should have cleared all outstanding liens. Usually get a special warranty deed.

Both can have tenants or previous owners living in them and would be the responsibility of the purchaser to get them out. They can still damage the property prior to move out. All the auctions will be cash bids.  

@Nikki Nicole You have two accepted offers so you bought two houses not one. You may lose your emd for the house you don't purchase, depending on the contingencies. The other real estate agent will not work with you again as you have wasted there time. You should have staggered the offers and let your agent know you were writing another offer somewhere else. Reputation matters in the industry.

@Akshay Wattal usually it comes out of the proceeds of the seller, but it  depends on the contract. It has to be cleared to get a new mortgage plus any other liens attached to the property. 

@Jay Underwood When your unit turns over in 20 months, what is it going to cost you? What happens if you have a service call? That is the basis of maintenance budget. Do you know what capex is? An expense in the future. Let's look at 1 item in a capex budget.  Since you didn't tell the size of the property I will make up some number. Let's say you put in new floors with your rehab. Ask what the commercial warranty. It will be 10 years or less. My area it is $6 sf to replace. So if you have 2000 sf of flooring it will be $12000/120 months lifespan= $100 per month to save for that one item. Other capex items: roof, appliances, hot water heater, hvac, windows, exteriors, remodel, etc.

@Seung Don Hong your tenant doesn't respect you. It is time for the tough love. Send and post on the door a notice to cure. This is the start of eviction proceeding. Give the tenant a week to cure the problem and if he doesn't start the eviction process. If you have received any HOA fines include that in your notice to cure.